9911796707
TMI Blog1972 (2) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer, respondent No. 1, by means of its letter dated January 8, 1970, that it intended to change its accounting year from 1st of January to 31st May, 1970, and thereafter every year on 31st May instead of 31st December. It, therefore, requested that it may be given the permission to close the accounting year commencing from 1st January, 1970, to 31st May, 1971. This approval was sought for under section 3(4) of the Act for changing the next accounting year, i.e., year commencing on November 1, 1970, to end on 31st May, 1970, or 31st May, 1971, as desired by the Income-tax Officer. The Income-tax Officer sought certain information from the petitioners about the profits for 12 months ending on 31st December, 1969, and the expected profit from 31st January, to 31st May, 1970. This information was duly supplied by the petitioner. But, respondent No. 1, by means of letter dated 8th May, 1970, informed the petitioner that in the absence of any cogent reason it was not allowed to change the meaning of the expression "previous year " as applicable at present. The petitioner, therefore, took up the matter with the Central Board of Direct Taxes, respondent No. 2, and pointed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The " previous year " is defined in section 3 of the Act to mean the financial year immediately preceding the assessment year or if the accounts of the assessee have been made up to a date within the said financial year, then, at the option of the assessee, the twelve months ending on such date. Section 2(9) of the Act defines the assessment year to mean the period of twelve months commencing on the 1st day of April every year. Tax is levied for each financial year commencing on the 1st April at the rate or rates prescribed under the Finance Act and is a charge on the total income of the financial year. The assessee has been given the option to choose his accounting year ending on any day within the preceding financial year as his previous year. But, once he has exercised his option then by virtue of section 3(4) of the Act he shall not, in respect of that source, or, as the case may be, business or profession, be entitled to vary the meaning of the expression " previous year " as then applicable to him, except with the consent of the Income-tax Officer and upon such conditions as the income tax Officer may think fit to impose. It is thus not correct to urge as the counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 3(4) of the Act, but it cannot be accepted that this discretion evert if exercised arbitrarily and capriciously, is beyond the scrutiny of this court. Of course this court will not substitute its own opinion or discretion for that of the Income-tax Officer. But, if the assessee is able to show that this discretion has been exercised in a mala fide or arbitrary manner or on extraneous considerations the same will be subject to challenge under article 226 of the Constitution. But, simply because the Income-tax Officer has not chosen to agree to the terms offered by the petitioner does not necessarily mean that he has acted arbitrarily or capriciously. It is to be remembered that the purpose of the Act is to levy tax and to collect the same. The interest of the revenue is uppermost. It is obvious that there would be many cases with various ramifications and each has to be decided on the peculiar facts of its own case. Simply, therefore, because discretion has to be exercised by the Income-tam Officer, it cannot be said that its refusal per se is always discriminatory. The assessee who so alleges must demonstrate how and in what manner the discretion has been exercised in a fanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus be able to hold the meeting six months thereafter, i.e., by September. But he, however, strongly contended that the whole purpose of changing the meaning of the previous year from December to May was to get the benefit of postponing the time for the payment of advance tax and the further postponement of the period for being assessed. In the affidavit filed in return by the Income-tax Officer, it has also been stated that the reasons given for the change of the " previous year " are reasons which are common to every company which is subject to income-tax and company regulations and for identical circumstances and rather subject to identical obligation and that if the petitioner's reasoning is carried to its logical conclusion, it would follow that it would not be possible for any company to close its accounts at any point of time other than that advocated by the petitioner. The fact that the petitioner had been closing consistently its accounts on 31st December every year also negatives this reason for permission being granted to change the accounting year. It is also stated that the Income-tax Officer honestly believed that the request of the petitioner asking for permission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner but that it was found that if the change in the meaning of the expression " previous year " was to be allowed there would accrue substantial loss to the revenue every year because the petitioner would be in a position to defer the payment of advance tax by a period of 7 months year after year. It is not as if the suggestion by the respondent that by the change in the meaning of the " previous year " the petitioner will benefit by not paying the advance tax in the current year and postponement of the determination of tax is without any basis will be clear by making a reference to the statements filed by the petitioner itself (as annexure " k " in C.W 996/71 and annexure " L " in C.W. 997/71). In the statement, annexure " K ", it is stated that advance tax paid for the assessment year 1971-72 is Rs. 82 lakhs. Now if no change of " previous year " was permitted the whole of this amount will obviously be adjusted against the completed assessment and the petitioner will be paying the advance tax for the assessment year 1972-73 separately. However, if the change of " previous year " is permitted the statement itself indicated that the petitioner becomes entitled to a refund ..... X X X X Extracts X X X X X X X X Extracts X X X X
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